Feb 20 (Reuters) - Leap Wireless International Inc
reported a 1.5 percent decline in quarterly revenue as it lost
far more customers than Wall Street had feared, sending its
shares down 7 percent.

The wireless service provider for budget-conscious customers
who pay for calls in advance, said it lost 337,000 net customers
in the fourth quarter. The average expectation on Wall Street
was for losses of 55,000 customers, according to analysts.

Leap has been trying to boost its revenue by signing up
higher-spending customers with the sale of smartphones such as
the Apple Inc iPhone but many of them cannot afford to
pay for those devices.

Chief Executive Doug Hutcheson told analysts on a conference
call that he is not happy with the company's results and
complained about softness in the prepaid sector as well as
customer departures related to its phone prices.

"By far and away the biggest thing is the device pricing and
the ability for customers to pay for the device" Hutcheson said.

While the first quarter is typically strong for Leap because
customers use tax refunds to buy phones, the company warned that
customer additions would be lower in the current quarter than
the first quarter a year ago.

New Street analyst Jonathan Chaplin said the fourth quarter
customer losses, which compared with customer growth in the
year-ago quarter, had "deteriorated drastically" in the quarter.

The company - which competes with rivals such as MetroPCS
Communications Inc and Sprint Nextel Corp and a
host of other prepaid services - promised a reduction in
customer defections for 2013 from initiatives such as device
financing for its customers.

But some analysts said that the best investors could hope
for is an eventual sale of Leap. Hudson Square analyst Todd
Rethemeier questioned whether the company would be able to turn
around on its own.

"In the last three quarters they've lost about 14 percent of
their subscriber base," said Rethemeier. "Management seems
unable to find a strategy to reverse that.

"The only reason the stock is trading as high as it is
because people think there's potential for a buyout," Rethemeier
added.

But Roe Equity Research analyst Kevin Roe noted that
potential Leap suitors Sprint and MetroPCS may not be able to
make a bid for the company for some time.

Sprint is currently seeking to buy Clearwire Corp
and to sell 70 percent of its own shares to SoftBank Corp
and MetroPCS is looking to merge with T-Mobile USA, a
unit of Deutsche Telekom.

"What Leap has to do is conserve cash to survive until the
next round of consolidation," Roe said.

Leap said its fourth-quarter net loss narrowed to $74.3
million, or 96 cents per share, from a loss of $84.4 million or
$1.10 per share in the year-earlier quarter.

Revenue fell to $756 million from $767.4 million and was
below Wall Street expectations for revenue of $778.8 million,
according to Thomson Reuters I/B/E/S.

Leap shares were down 44 cents or more than 7 percent at
$5.68 in late morning trade on Nasdaq.